The Role of the Dynamic Entrepreneur

People who know me tease me that I can’t have a discussion about innovation or entrepreneurship without somehow inserting a certain Austrian-American economist and political scientist into the dialogue. So, rather than disappoint anyone, let me start this blog with Joseph Schumpeter.

Entrepreneurs are often equated with innovation because their start-up businesses and inventions usually disrupt the status quo by introducing some new innovative product, service, or business design.

Schumpeter called this phenomenon “creative destruction,” which he writes about in his book on business cycles. Schumpeter’s business cycles are waves of creation and destruction working in a synergistic fashion. They are not linear, but rather, what today we call emergent, organic, and holistic. In Schumpeter’s mind, the spark behind these waves is the dynamic entrepreneur.

For Schumpeter, the entrepreneur can best be described as an “innovator of business advantage.” The entrepreneur does not simply have an idea, he is able to implement an idea, turn it into action, and validate it in the marketplace in an advantageous way. Thus, for Schumpeter, the entrepreneur is the key to understanding economic systems—a mover and shaker who can “just as easily turn economies upside down as take them from one general equilibrium to another.”

Entrepreneurship, in Schumpeter’s thinking, is not a profession or a position that could be handed down from one generation to the next, but rather a special kind of leadership—not a glamorous kind based on military achievement, executive rank, or political power, but a talent for seizing business advantage through disruptive innovation.

The entrepreneur in other words, is not chosen by blood, breeding, popularity, service, or tenure, but by intellect and will; Schumpeter called entrepreneurs an “aristocracy of talent.” To Schumpeter, the entrepreneur’s achievements are the result of a noble spirit, the expression of a Promethean mind, independent thinking, and creative genius.

And, when Schumpeter’s “noble creators” come together, they “swarm” around innovation, collaborating in a way most others simply can not understand because it lay outside the realm of routine in an environment that resists conformity and blind obedience to authority and standard practice. Maybe that’s why places like Silicon Valley, Seattle, RTP, Austin, and other tech hubs are such dynamic and interesting communities in which to live and work?

“To act with confidence beyond the range of familiar beacons and to overcome that resistance,” Schumpeter said, “requires aptitudes that are present only in a small fraction of the population and that define the entrepreneurial type as well as the entrepreneurial functions.”

At the end of the day, if Schumpeter had been a novelist, his heroes would be innovators and entrepreneurs, his villains would be Keynesian-type central planners, and they’d all be involved in an epic struggle that would determine the fate of humanity. Wait a second…that sounds familiar…someone actually wrote that book.

Based on this Schumpeterian concept of the dynamic entrepreneur and his role in the diffusion of innovation and economic process, it’s easy to get passionate about being a catalyst and evangelist for such endeavors.